Nokian Signs JV Agreement in Kazakhstan

After months of speculation about Nokian Tyres’ involvement in a new project in Kazakhstan, the Finnish manufacturer formalised its commitment to establishing a greenfield passenger car tyre factory in this northern Eurasian nation on October 19 through the signing of an agreement with Kazakhstanian multi-industrial company Ordabasy Corporation JSC.

The two parties’ cooperation will take the form of a joint venture company called Ordabasy – Nokian Tyres JSC. Nokian will hold a 10 per cent stake in the joint venture company, with an option to increase ownership to a minimum of 50 per cent.

According to Nokian Tyres the Ordabasy – Nokian Tyres JSC factory will be built along similar lines to the existing Nokian Tyres’ plant in Vsevolozhsk, Russia. The facility will be built in the Kazakhstan capital, Astana, and become operational during 2009, with the target of reach its full capacity of 4 million car tyres by 2012 or 2013. During the first five years between 35 and 65 per cent of capacity shall be reserved for Nokian Tyres, and a minimum of 35 per cent thereafter.

The tyremaker will provide the know-how and technical expertise required to build the factory and to produce tyres. Two established brands, Nokian and Nordman, will be produced at the new factory in addition to a new product that will be developed for the joint venture company. Output from the plant will be sold in Kazakhstan, other parts of Central Asia, Russia and Eastern Europe.

Kim Gran, president and CEO of Nokian Tyres, states that the joint venture company enables Nokian Tyres to establish a stronger position in the rapidly growing Kazakhstanian, CIS and Eastern European markets, with the benefits of raising manufacturing volumes and strengthening the Nokian brand. Total investment in the project will be approximately 160 million euros, financed through equity of approximately 40 million euros and external loans. Nokian Tyres has made a long-term technical and management aid agreement with Ordabasy Corporation.

When T&A first reported on plans to build the factory in early June, only the sketchiest of details were made available; Nokian were silent about their involvement in the project. This information did not surface for another month, and even then the tyremaker was reluctant to provide official confirmation until late August.